Abstract

Over the past decade, India has experienced rapid economic growth along with increases in levels of air pollution. Our goal is to examine how alternative policies for air pollution abatement affect well-being there. In particular, we estimate the effects of policies to reduce the levels of ambient fine particulates (PM2.5), which are especially harmful to human health, on well-being, quantified using the United Nations' human development index (HDI). Two of the three dimensions of this index are based on gross domestic product (GDP) per capita and life expectancy. Our approach allows reductions in PM2.5 to affect both of them. In particular, economic growth is affected negatively through the costs of the additional pollution control measures and positively through the increased productivity of the population. We consider three scenarios of PM2.5 abatement, corresponding to no further control, current Indian legislation, and current European legislation. The overall effect in both control scenarios is that growth in GDP is virtually unaffected relative to the case of no further controls, life expectancy is higher, and well-being, as measured by the HDI, is improved. In India, air pollution abatement investments clearly improve well-being.